Quick Facts

Burma’s economic freedom score is 46.9, making its economy the 161st freest in the 2015 Index. Its score is 0.4 point better than last year due to improvements in five of the 10 economic freedoms, including freedom from corruption, labor freedom, and monetary freedom, that outweigh a substantial decline in the control of government spending. Burma is ranked 38th out of 42 countries in the Asia–Pacific region, and its overall score is much lower than the regional average.

Over the past five years, economic freedom in Burma has advanced by about 9.0 points, the second-best improvement among graded countries. From a low base, Burma has made considerable strides in liberalizing its economy and opening itself to the outside world. Gains in eight of the 10 economic freedoms include greater price stability and double-digit improvements in labor freedom and investment freedom.

Nevertheless, Burma remains a “repressed” economy due to years of state intervention, poor institutional structures, and autarkic investment and financial regimes. To solidify and build on the past half-decade’s gains, the government must continue its reform agenda with particular emphasis on stamping out corruption, enforcing property rights, creating an independent judiciary, and further opening up the economy to the international marketplace.

Background

Burma has been a military dictatorship since 1962 but since 2010 has pursued limited political and economic reform, including releases of political prisoners, relaxation of media censorship, and exchange rate reform. Sectarian violence and continued persecution of Muslim and Christian minorities remain problems. National League for Democracy leader and Nobel laureate Aung San Suu Kyi was released from jail in November 2010 and won a seat in parliament in 2012. The United States and the European Union eased some sanctions in response to Burma’s limited changes, but state-sponsored repression has led many to urge caution before lifting all sanctions. Heavy government intervention in the economy has made Burma one of the world’s poorest countries.

Burma’s emerging but deeply flawed democratic reform process will likely lose momentum in the run-up to the 2015 elections. Corruption is endemic. Due to a complex and capricious regulatory/legal environment and extremely low government salaries, rent-seeking is ubiquitous. Rule of law and protection of property rights are weak. Judicial decisions are often influenced by government interference, personal relationships, or bribes.

Burma’s top individual income tax rate is 20 percent, and its top corporate tax rate is 30 percent. Commercial and capital gains taxes add to government revenue, but the overall tax burden remains less than 5 percent of gross domestic product. Public expenditures amount to 27.2 percent of the domestic economy, and public debt is equal to around 43 percent of total domestic output.

Significant bureaucratic impediments to entrepreneurial activity and economic development persist. The labor market remains underdeveloped, and enforcement of the labor codes is ineffective. The informal sector continues to be an important source of employment. Inflation is expected to remain elevated, led by higher prices for rice and other staple foods and electricity.

Burma’s average tariff rate is 3.2 percent, and some imports face additional restrictions. The government reviews new foreign investment, and state-owned enterprises dominate some sectors of the economy. The financial system remains underdeveloped, and the banking sector is dominated by state-owned banks. Most loans are directed to government-led projects, and access to credit remains very poor.